However, research by SevenCapital has found that in recent years, the majority of investors have recognised the potential of off-plan property. With 75% of our investors having chosen this investment route over the past three years, is the market shifting from traditional buy-to-let to off-plan property?
Not only have more investors been completing on off-plan developments, but the last three years have also seen these enquiries dominate over those for completed properties. While 42% of SevenCapital enquiries over the same period have been for completed developments, the remaining 58% have been for off-plan properties, signifying this rising demand.
But, what is Off-Plan property?
Despite this rising popularity, many people are not familiar with off-plan property investment, which has impacted its addition to many portfolios. In a nutshell, investing in off-plan property essentially means investing either before - or during - the construction period. This way of investing is typically more common with apartments but can also be possible with alternative property types.
With the nature of the investment process, off-plan property isn’t for everyone. The typical timeline associated with off-plan property means that your money will be tied up during the build phase, but it is this period that has made off-plan investment more favourable against completed property.
Why are investors choosing Off-Plan?
The opportunities that come with off-plan property are at the root of this demand, with more potential for capital gains. It’s understandable that having your money tied up in an intangible asset doesn’t fit with everyone’s financial goals, but the time taken for the development to complete can see your investment grow in value before it’s even been built.
The average time for an off-plan property to complete is around two years and a lot can change in this time. During this period, provided you’ve done your research, the surrounding areas can undergo some form of development and encourage natural capital growth within your property. Upon completion, this could mean the development is worth more than you initially paid.
This is where the location of your off-plan investment can propel your returns even further. Emerging locations are those that are undergoing some form of resurgence, usually due to a significant regeneration scheme, which we are seeing across Berkshire with the likes of Bracknell and Slough. As the property is developed alongside these regeneration projects, the overall area will increase in both value and popularity.
Tenant demands are constantly evolving, and with an increasing focus on modernity and tech, off-plan developments can meet these priorities, arguably more so than completed property. The promise of a brand-new apartment often means new fixtures, fittings and furnishings, which upon completion, is more likely to appeal to a wider pool of tenants.
Should I consider Off-Plan property?
Like with any investment, nothing should be off the table until you’ve done your due diligence. Whether you choose stocks and shares or property, all investments come with their risks, but if you find yourself considering off-plan property, there are several considerations.
Many of the opinions surrounding off-plan developments stem from it being ‘riskier’ than completed property. As with any investment, there is an element of risk but this can often be minimised in the early stages of your research. With the nature of investing pre- or mid-build, there are often concerns surrounding whether or not the development will actually complete.
However, choosing a trusted developer with a strong track record can significantly reduce the chances of the property not completing. So, what should you look for? During your research, keep a lookout for testimonials, previous developments and completion times, which will then give you an idea of their reputability.
If your investment goals are more short-term, off-plan property may not be for you. As the property won’t be immediately available to let, you won’t be able to yield a passive income straight away. This doesn’t necessarily mean your investment won’t be making money during this period, it just means that you won’t be able to touch it.
Presenting opportunities for capital growth and increased future tenant demand, it is no surprise that off-plan property investment is on the rise. When compared to investing in completed property, off-plan developments can offer many benefits, from modern designs to contemporary fixtures and fittings. As the demand for these features inevitably continues to grow, it’s possible that more than 75% of investors will opt for this investment avenue in the years to come.
